Southern Nevada’s residential real estate market has undergone a few changes as far as market cycles go. Starting in early 2006, our market started to stabilize, and depending on certain ZIP codes, slight market corrections to home prices occurred. As financial markets failed due to high-risk scenarios being played out by consumers who were allowed by government-sponsored entities such as Fannie Mae, Freddie Mac, and most recently Sallie Mae (purchasers of student loans), we have experienced a severe meltdown in our marketplace. 

With foreclosures and discounted mortgage notes (referred to as short sales) on the rise, there is panic and doubt felt by many consumers about the value of home ownership.

Fraudulent situations leading to foreclosures, involving several classifications of “professionals,” added to the woes in our marketplace. This most recent scenario of slower than normal sales activity involving residential property has had a far-reaching impact on our national economy.

As mortgage-backed securities found their way into hedge funds, the outcome of the situation is now a global problem. The overall domestic economy is on the brink of a recession with the “help” of our sluggish housing market.  Right now, this is not good news. But, as many of us realize, markets change constantly.

If markets are allowed to work through their problems, and given the importance of real estate to our economy as a whole (analysts estimate that real estate and related industries comprise 20 to 25 percent of our gross domestic product), sometimes a helping hand by the government doesn’t hurt either.

Our president recently signed an economic stimulus package into law. Besides sending payments to many working Americans and granting tax incentives for business investment, the legislation included loan limit increases, which will add liquidity to our mortgage market. This will encourage people to purchase homes and refinance mortgages into safer, more affordable products.

The recent aggressive drop in both the federal funds rate and the prime interest rate has trickled down into the long-term bond market, which directly affects our mortgage interest rates. These two situations have encouraged activity with investors and owner- occupants alike.

The government is fully prepared to continue to cut interest rates should our national economy need the additional boost in order to ward off a recession.

Now, here’s the better news. Southern Nevada continues to grow in population each and every month.  The amount of equity infused into our economy (primarily the Las Vegas Strip) is estimated at more than $40 billion. This development alone will create many temporary employment opportunities, which will likely translate to many permanent jobs. 

When you combine this scenario with the fact that our investors have not kept pace with the purchase of residential properties over the course of the last two years, it becomes fairly apparent that we need to brace ourselves for the next change in the residential cycle for our area.  Many analysts predict a balance in our market within this calendar year for a very brief period of time. That is, there will be an even amount of buyers and sellers. 

The next cycle will be a seller’s market, but for how long nobody knows. Home builders have dropped the number of active permits for new development, which will also contribute to the seller’s market in the form of reduced housing inventory.

What does all of this mean to the average consumer?  That’s simple: there has never been a better time to buy. Consumers have been slow to make the move, which means choices are still somewhat plentiful, interest rates are at a historic low and there is more affordability in our marketplace than ever before. Taken together, this means increased buying power.

But, buyers beware. Sophisticated investors have started to come back into the market because of the favorable exchange rate with European and Asian currency relative to the weakened dollar. This has started to tip the scales with more foreign buyers in the market more than ever before.

So don’t delay the buying decisions, or you may miss out on our current window of opportunity.

What can we expect in the next two years as this cycle turns more than once in this relatively short period of time? Consumers need to be mindful that lending restrictions will be more prevalent than in recent history. Equity and cash reserves will be necessary for consumers to be considered credit-worthy. Credit scores will have to be higher and consumers will be required to show their ability to financially support the property.

This will be the “new” way to be approved by lending institutions. 

Who will help consumers navigate the new rules, the new market and help them maximize the value of their long-term investment?  The professional REALTOR® is the only person who knows the local market and can adapt to changes as fast as they present themselves. Knowing that a house is a home should be enough incentive to have a piece of the American dream with ownership of property. If you go back more than 50 years, you will see that the average home nearly doubles in value every 10 years. We are going back to the past to reap the rewards of the future. Call it back to basics.   

Linda Rheinberger, MBA,ABR,CRS,SRES